Exports help tad recovery in manufacturing

New Delhi, Feb 4 (KNN) India’s manufacturing activity recovered to a 10-month high in January on the HSBC Purchasing Managers’ Index (PMI) helped by improvement in export which has a pre-dominant presence of the MSMEs.

Operating conditions for India’s manufacturers improved further in January, according to the HSBC India Manufacturing Purchasing Managers’ Index (PMI).

The index, fuelled by higher output and strong orders, rose to 51.4, from 50.7 in December ­­– the highest reading since March 2013. However, the pace of expansion was below the series average of 55.1.

A reading of more than 50 indicates expansion while anything below that signals contraction. This was the third straight month of expansion, after the index contracted in three consecutive months up to October. 

New orders expanded at the fastest rate for ten months, helped by an improvement in new export business. Output rose for the third consecutive month, with respondents citing new contracts as the main reason for increased production levels, according to a press release.

This survey is conducted every month among managers of 500 companies. Results of the survey indicated that the latest reading was the highest since March 2013. However, the expansion is marginal and still well below the average reading of 55.1.

Commenting on the survey, Chief Economist for India and ASEAN at HSBC, Leif Eskesen said, "Manufacturing activity moved into higher gear, led by faster growth in new orders. However, inflation pressures also firmed, suggesting that the RBI has to keep up its inflation guards.”

The survey suggests that consumer and intermediate goods were behind the recent expansion, but that capital goods production softened. Backlogs of work continued to rise but at a slightly slower rate, probably helped by stronger employment growth.

“Average input costs increased, with manufacturers reporting that higher prices for raw materials were passed on to customers,” said the release.

The rate of cost inflation remained robust. Consequently, companies raised their tariffs again. Although the strongest in three months, the latest rise in output charges was moderate and much weaker than seen for input costs.

Sector data indicated that consumer goods continued to outperform the remaining two monitored categories, while operating conditions deteriorated at capital goods producers. Growth rates for output and new orders in the consumer goods sub-category surpassed those seen at intermediate goods companies.

Employment rose for the fourth month running in January, with all three broad areas of the manufacturing economy posting job creation. Despite being slight, the overall rate of expansion was broadly in line with the long-run series average.